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Sunday, November 27, 2016

More Things That Just Shouldn't Be


A few weeks ago I wrote about Juicero, the "Keurig for Juice", and how despite it being a $700 juicer that required $120 million in funding to realise, there were reasons that an investor would put money into it (dumb reasons, but justifiable dumb reasons). Now it's the turn of "June", the toaster oven. To quote the company:

June is a modern appliance company dedicated to bringing intelligence to the tools you use in the kitchen. Our first product, the June Intelligent Oven, allows everyone to discover the joy of cooking at home by enabling precision cooking and restaurant quality performance on your countertop. The June Intelligent Oven's unique features and brilliant design put an end to guesswork and pave the way for faster, better cooking. Our team of designers, hardware and software engineers is committed to transforming the kitchen experience.

Now, apart from the fact that the joy of cooking is the constant improvement and learning through experience to produce tasty food from imperfect ingredients and tools through skill, it's a nice idea. Maybe they can help the average Joe who doesn't have time to learn to cook prepare quick and nutritious food at home rather than dining out or eating salt and sugar laden pre-packaged meals. Looking at Target and Amazon, the price ranges for most toaster ovens are in the the $50 to $150 range, with the highest rated top-of-the-line ovens going for about $225, so a superior oven may go for $300 to be competitive. 

What does the "June" retail for? $1495 (yes, one thousand four hundred and ninety five dollars).

So what do you get for this $1250, or 500%, premium over the best of the rest? Well it comes with a camera that recognizes your food, and then uses its "intelligence" to cook it to perfection, all the while sending you updates via your phone, letting you know it's ready. Of course, it's got that "Apple look" so that's worth a premium too, but that's about as far as the innovation goes. 

And what did it take to produce this masterpiece oven? According to Crunchbase, near $30 million (yes, thirty million dollars), and from their own website, it looks like June has near 50 people working for them. Interestingly, of those 50, I only count around 6 who are potentially involved in hardware design. It's no surprise, then, to hear that the actual hardware design was outsourced to Ammunition (who designed the Lyft logo). Yes, June didn't even design the hardware, and likely just gave Ammunition a list of key features needed without remembering to include "and a Bill of Materials of no more than $100". That, combined with the founders who are software and not hardware people, is probably why nobody said "Um. This is going to be way more expensive than the competition and not deliver substantially improved performance in any area, maybe we should rethink this."

Even the company itself is really struggling to push its virtues - the website uses this as one of the leading quotes from a review in the Wall Street Journal:

The June Intelligent Oven is an Internet-connected countertop system that can recognize foods and automatically cook them for you.

Wow, I have to get myself one of those! An oven that cooks! Amazing! The co-founder then goes on to really sell it well in a Techcrunch article:

“It’s always surrounding your food with hot air,” Bhogal said. “What’s cooked in the corner will always taste like what’s cooked the middle. We spent a lot of time adding precise temperature controls, and that’s not usually seen in this space. We spent a lot of time fine-tuning the cavity. We used a cavity which helps with heat, we fine tuned our insulation, and even the door itself.”

So basically it acts like every other convection oven, but - and here's the real key differentiator - there was a team of Silicon Valley startup engineers who spent lots of time fine tuning components. Yep, that'll make your food taste better and your wallet hurt less. (BTW, the engineers who make ovens actually do spend time working on things like that, they just know they're on a budget)

And this is both why this product is ridiculous, and why a large portion of the world looks at Silicon Valley with contempt. This product is not about the customer, or serving an unmet need. It's about serving the egos and notion of self-worth of a couple of people in the top % of education and income. The customer doesn't care how much time you spent fine tuning things, what the technology is, or how much you need to believe you're changing the world - what they care about is a product that solves their problem, makes their life easier, gets things done faster, all at a reasonable price. That's it. While the privileged few can worry about their feelings of self-worth, most people just need to pay the bills and get through the day as best they can.

It's why the likes of Uber succeed and despite their sometimes dubious business practices remain popular. They take a useful and needed service like on-demand transportation, that is currently underserved, and then make it frictionless and easy to use, all at a price point that's highly competitive. They tapped into a need of the customer, and met it. It's why in the traditional layout of a pitch deck that is presented to VCs by a startup, there are a couple of slides on things like "Customer Need" and "Pain Points".

So what would June have presented to VCs in this regard, to show the market need, huge potential for growth, and ongoing revenue? Well, I've sat here for a few hours trying to come up with the pitch that, like with Juicero, would make this product make sense, and I've failed. Here's the only thing I could come up with: One of the co-founders was the co-founder of Lyft. That's it. He previously co-founded a successful startup and even though it is not even in the vaguely same space, software/service rather than hardware, that's all that's needed. Everyone knows the hardware part is easy, and you just outsource that anyway.

Now, to be fair, they may have been pitching the larger play, in getting into "the connected home", and becoming a brand name like Nest, and therefore willing to pay an upfront cost of an expensive first product to gain the skills needed to iterate and improve - the long game, as it were. Even there I just couldn't see where the money comes in. However even if that's the play they've made a basic mistake, and that's in the outsourcing of the hardware.

In not building the hardware themselves, they clearly fail to appreciate the interaction of hardware and software, the necessary back and forth between the engineering teams. The adjustments, the compromises, the understanding of how things work together, are all key to building a product that meets a need in a cost effective manner. It's a common mistake from people with a software only background, when leading a hardware project, to "black box" everything like modules and view it as a Gantt Chart rather than as an interconnected system where feedback between the components is an integral part of the design and development phases. Now, even after $30 million in funding, they don't have the skills to do their next product themselves, it's going to have to be outsourced again. 

I can't blame the outsourcing company for taking the gig, after all, payment is not based upon the product actually selling, but rather satisfying the ego of a startup founder with millions of dollars of other people's money. I can't even blame the founders for taking $30 million, if it's offered. That VCs funded this without someone really looking at their business model is just stunning, but hey, hardware is hard, and the guy did co-found Lyft, so what more do you need?

All the actors in this play are just acting in line with the incentives. Put the money out there, and they'll play whatever part allows them to get a share of it. Without that money, or with different metrics for award of it, the world of $1500 toaster ovens might actually become one where there are products made that customers need.

And how well does the product work? To answer that I'll leave with this quote from a product review entitled "This $1500 Toaster Oven is Everything That Is Wrong with Silicon Valley Design".

Cooking has always been a highly personal, multi-sensory experience, where trial and error is the only way to become the all-star cook most of us know as grandma. But as I put the salmon on the table 40 minutes later than projected, I had no idea what I should have done differently, other than to never have used June in the first place.

9 comments:

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    1. Just one of the bots posting comments, basically every comment you see that is now "This comment has been removed by a blog administrator" is something like that one was. For those who wonder what they say, it's something generic about how great the blog is, then a link to whatever they want you to go to:. This one read:

      "I really appreciate your work and very amazing and important information about the Startup Ventures which have share in this blog.
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      I try to delete these as they appear.

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  3. Just wanted to take the time to say that I love your blog. I'm an electrical engineer by degree (only a couple years out of school now), and it had always been a dream of mine to travel out to the west and work for some hot new startup. It's nice to see someone offer some glimpses of truth about it. Silicon Valley is rather glamorized, so I'm glad you're dispelling some of the sillier notions I (and many others) have had.

    At the very least, though, I now see how painfully easy it is to get investors to part with their money. That'll be good to know if I ever get really desperate.

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  4. By coincidence I'm about to disrupt the electric kettle space; the vision is of a device to which you merely insert one of our handy, hygenic single-use Water(TM) pouches then just grab your smartphone, run our app, connect via bluetooth, enter your secret passphrase, select "boil", press "go", "yes" and "confirm", then R-E-L-A-X as it uses advanced machine learning algorithms running in the cloud to heat your water to PRECISELY 212degrees* F. The UltraBoiler(TM) then posts a notification to all the major social media sites (and photos of the steam to Instagram). No more burned water, EVER! Accepts convenient disposable smart-cartridges (no more messy filling from the tap!), available in a handy six-pack.

    We should be able to put this baby in the hands of an eager public for easily under $100m. The market opportunity is just huge; take the population of the world (7.5Bn) divide by two (couples will share) and multiply by eleventy-six dollars.

    (*product only available for purchase by users living at sea level or lower altitudes)

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